Controlling Class 12 Notes Business Studies

Controlling is one of the most important managerial functions and can be defined as the comparison of actual performance with planned performance, finding deviations, and taking corrective action. Here are the controlling class 12 notes.

Features of Controlling

1. Controlling is a goal-oriented function: The controlling function makes sure everyone follows the plan.
2. Controlling is pervasive: Controlling is a function performed by all levels of management.
3. Controlling is a continuous function: Controlling is not a one-time job, it is an ongoing process.
4. Controlling is both backward and forward-looking: Managers compare the planned performance with actual performance and they also learn from the mistakes and make sure they don’t do them in the future.

Controlling Process

The controlling process involves 5 steps as follows:
1) Setting performance standards
2) Measurement of actual performance
3) Comparison of actual performance with standards
4) Analysing deviations
5) Taking corrective actions

Setting Performance Standards

Standards mean targets against which the actual performance is measured. The standards must be achievable, very high standards which cannot be achieved are of no use.

Measurement of Actual Performance

After setting performance standards, actual performance is measured. While measuring the performance, the qualitative and quantitative aspects of performance are to be kept in mind.

Comparison of Actual Performance with Standards

After measuring the performance, the managers compare actual performance with the planned performance. If there is a match in both then, controlling ends but if there is a deviation, the managers try to find the extent of the deviation.

Analyzing Deviations

All the deviations need not be brought to the notice of top management. Arrangements for deviation should be established and only those deviations that are beyond the permissible range should be brought to the notice of top-level management.

Critical Point Control

It means keeping focus on some key result areas (KRAs) and if there is any deviation in these key areas, it must be attended to urgently.

For example: If production cost rises by Rs. 5 per unit and postal cost by Rs. 10 per unit then more focus should be on finding out the reasons for the increase in production cost as it will affect the profitability of the organization.
Postal cost is incurred rarely and managers have no control over it.

Management By Exception

It means a manager who tries to control everything may end up controlling nothing. The deviations which are beyond the specific range should only be handled by managers whereas the minor deviations can be ignored.

For Example: If production cost rises by Rs. 0.001 per unit, then it should be ignored as it is not beyond the specific range.

Taking Corrective Action

After comparing the actual performance with the planned performance, the managers come to know the deviations.

After finding out the deviations, the next step is to know the reasons for such deviations and try to remove those deviations in the future.
Corrective actions may involve:

• Letting the situation remain the same if the deviations are minor.
• Re-designing or reframing the plans if they do not match the present business environment.
• Taking measures to improve the performance so that it matches with the plans in the future.

Planning Notes Class 12

Relationship between Planning & Controlling

The planning and controlling functions of management are very closely related. These are considered inseparable twins of management.

• Planning and Controlling are interdependent and interlinked: Planning and controlling functions always co-exist as one function depends on the other.
  Without planning, there would be no standards against which performance could be compared, similarly without controlling, there would be no monitoring on whether performance is as per the standards.
• Planning and Controlling are both backward & forward-looking: Planning is backward-looking as it learns from past mistakes to make better standards, on the other hand, it is also forward-looking as plans are always made for the future.
  Controlling measures performance from the standards made in the past, on the other hand, it also learns from the deviations so that they do not repeat in the future.
• Planning is prescriptive whereas Controlling is evaluative: Planning is an intellectual process involving a lot of thinking, and comparisons whereas controlling is evaluative as it checks whether the desired course of action is followed or not.

Importance of Controlling

Making Efficient Use of Resources

The controlling function helps in the proper and efficient use of resources as each activity is performed according to the pre-determined standards and there is no overlapping and wastage.

Judging Accuracy of Standards

Through controlling, we can easily judge whether the targets are set accurately or not. An accurate target control system revises standards from time to time to match them with environmental changes.

Helps in the Achievement of Organisational Resources

When the plans are made, these are directed towards the achievement of organizational goals and controlling functions to make sure that all the activities take place according to the plan.

Ensures Order and Discipline

Controlling creates an atmosphere of order and discipline in the organization. An effective controlling system keeps the subordinates under check and makes sure they perform their functions efficiently.

Improving Employees Motivation

An effective control system communicates the goals and standard of appraisal for employees to subordinates well in advance.

Facilitates Coordination in Action

Controlling provides unity of direction. It makes sure that proper direction is taken and various factors are maintained properly.